| NEW YORK
NEW YORK U.S. mortgage applications slid last week even as mortgage rates edged lower, with requests for loans to buy homes declining for the first time since early July, an industry group said on Wednesday.
The Mortgage Bankers Association's applications index fell by a seasonally adjusted 2.2 percent in the week ended August 28, as demand for both purchase and refinance loans slipped.
Fixed 30-year mortgage rates averaged 5.15 percent last week, down 0.09 percentage point. This was still above the record low of 4.61 percent set in March yet a year ago this borrowing cost was 6.39 percent.
For a related chart of mortgage rates, right click on the code: and select "Related Graph."
Stability has seemingly returned to the three-year housing market that has endured the deepest crash since the Great Depression. The view that the worst may have passed is gaining traction.
Pending home sales, based on contracts signed in July, jumped 3.2 percent to a two-year high, the National Association of Realtors reported on Tuesday.
Economic stimulus that has boosted consumer optimism, signs that home prices have neared a bottom, and federal programs such as a soon-expiring first-time home buyers tax credit have turned more fence-sitters into house purchasers, industry experts said.
The NAR estimates that as many as 2 million first-time buyers will use the tax credit this year, and about 350,000 sales would not have occurred without it. Buyers need to close their loans by November 30 to qualify.
Sherry Chris, president and chief executive of Better Homes and Gardens Real Estate in Parsippany, New Jersey, expects a rush of applications in the waning weeks of the tax credit.
Once that phase passes, "if we see the continuation of the slight upturn that we're experiencing now, that to me will indicate that the market has in fact turned and we'll begin to see an upswing," she said. "We have a couple months of waiting to see if we've truly turned the corner."
The first-time buyer's market has been robust, but not the move-up market -- or the market for existing homeowners looking to trade up to a larger home. It will take consistent news of rising home prices to lure the move-up buyer, most realtors agree.
"There are a lot of people talking about the worst being behind us," said Chris, who calls herself cautiously optimistic. "There are so many other factors involved: the economic conditions, unemployment, consumer confidence."
The U.S. unemployment rate is expected to have risen to 9.5 percent in August, after declining in July for the first time since April 2008, according to a Reuters poll. The jobless rate had reached a high last seen nearly 26 years earlier.
The Mortgage Bankers Association said its purchase loan applications index dipped 1 percent to 277.6 last week. The last time this measure fell was in the July 10 week, when it was about 7 percent lower at 258.8.
The industry group's refinance index fell 3.1 percent last week to 2,164.1 after rising two straight weeks. Still, this measure of refinance demand was around three times stronger in the spring when mortgage rates toppled to a record low.
Only the government purchase index rose last week, the MBA said. The 0.5 percent rise put the seasonally adjusted index up for the seventh straight week.
The government-insured share of mortgage purchase applications rose to 40.4 percent in August, the highest since February 1991, the group said in a release.
Loans insured by the government typically require lower down payments than other mortgages.